Summit Midstream Partners LLC, which operates in shale plays across the country, plans to enter the Utica Shale after agreeing to acquire Blackhawk Midstream LLC's interest in two companies operating and developing midstream infrastructure in southeastern Ohio for $190 million.
Under the terms of the agreement, Summit Investments will acquire equity interest in Ohio Gathering Co. LLC and Ohio Condensate Co. LLC, which together form Ohio Gathering. The companies own a liquids-rich natural gas gathering system, a dry gas gathering system and a condensate stabilization, storage and terminaling facility in the core of the Utica.
Summit Investments will also have the option to increase its stake in Ohio Gathering to 40% at any time before June 2014, at a price based on the capital invested by the owners at the time the option is exercised. Summit said it "expects to fully exercise the option" and predicted it would do so in 2Q2014.
MarkWest Utica EMG LLC and MarkWest Utica EMG Condensate LLC will retain their 60% stake in Ohio Gathering and will continue to operate and develop the gathering infrastructure. Blackhawk is a joint venture (JV) of Gulfport Energy Corp. and Wexford Capital LP.
"We are excited to announce an expansion of Summit's relationship with MarkWest, which has developed an industry-leading midstream infrastructure position in the heart of the Marcellus and Utica shale plays," said Summit Investments CEO Steve Newby. "We are equally excited about our new relationship with Gulfport, the anchor shipper on Ohio Gathering, which is one of the most active producers in the Utica with over 147,000 net acres under lease in the most prolific part of the Utica Shale."
Summit Investments said it intends to offer all or part of its stake in Ohio Gathering to Summit Midstream Partners LP, after the exercise of the option and the subsequent development of the assets. The transaction is expected to close by Jan. 31, 2014 and is subject to customary conditions.
Ohio Gathering is supported by fees collected by gas producer customers -- including Gulfport, Rex Energy Corp. and PDC Energy Inc. -- that operate in five Ohio counties prospective to the Utica: Belmont, Guernsey, Harrison, Monroe and Noble. Meanwhile, Ohio Gathering's liquids-rich gathering system serves as an inlet to MarkWest Utica EMG's Cadiz and Seneca processing complexes.
"Our participation in Ohio Gathering will significantly increase our scale and further diversify our cash flows from a customer and geographic standpoint while maintaining our focus on providing fee-based midstream services under long-term contracts," Newby said. "This transaction provides [us] with an immediate and large-scale presence in the core of the Utica Shale play, where Ohio Gathering anticipates developing more than $3 billion of midstream infrastructure over the coming years."
Summit Investments has been buying midstream assets throughout 2013, beginning in January with the acquisition of Bear Tracker Energy LLC -- which had focused on oil and gas in North Dakota and Colorado -- for $513 million (see Shale Daily, Jan. 11). In June it acquired separate gathering systems in the Bakken and Marcellus shales for a combined $460 million (see Shale Daily, June 6).
Also in June, Summit Midstream announced plans to significantly expand its crude oil and water gathering systems in the Bakken, in North Dakota's Divide and Williams counties (see Shale Daily, June 27).